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why smh said"Aussie dollar hits 10-year high" while somelese in the forum says dropped dramatically? The Australian dollar shot up to its highest level in 10 years today after passing the 80 US cent mark on heightened expectations of an interest rate rise here in the short term. The currency surged to a high of 80.30 US cents in local morning trade as global stock markets strengthened and rate rise speculation continued. The local currency has climbed above the 80 US cent level only twice in the past decade and is now trading at its fourth highest level since it was floated in 1983. Since it was floated, the Australian dollar has reached 89.60 US cents in March 1989, 84.75 cents in September 1990 and 82.15 cents in December 1996. Deutsche Bank foreign exchange strategist John Horner said the domestic unit went up in line with other high-yielding currencies including sterling and the New Zealand dollar. "Partly it reflects the weakness of the US dollar we've seen over the past few days and the increased chance of a rate hike here domestically," he said. The domestic unit last traded above 80 US cents in February 2004. Overnight it traded between a low of 79.43 US cents and a high of 80.04, after closing at 79.54 US cents yesterday. Economists say a speech last week by Reserve Bank of Australia assistant governor, economics, Malcolm Edey, warning on inflation has driven the dollar higher. Dr Edey said on Friday that the central bank's projection for an underlying inflation rate of 2.75 per cent this year was higher than ideal. His comments raised speculation that another interest rate rise was on cards in the first half of 2007 - perhaps as early as May - after three hikes last year. "Growing speculation that the RBA many need to hike rates again has kept the upward pressure on Australian interest rates," nabCapital head of currency strategy John Kyriakopoulos. But a stumble in global equity markets could dent the Australian dollar and market watchers questioned whether its current advance could be sustained. "I don't think these levels will be sustained in coming weeks," Mr Horner said. "The commodity price environment and the risk environment will come under pressure." At midday the Australian dollar was back below 80 US cents. |
